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Abstract

An enormous body of literature exists on intergovernmental transfers between central governments and federal subunits. This work focuses almost exclusively on the economic justifications for such transfers, their design, and the challenges they pose to democratic accountability, transparency, and the autonomy of federal subunits. The legal dimension of intergovernmental transfers has received comparatively little scholarly attention. Systems of intergovernmental transfers are constituted and governed by domestic constitutional law, intergovernmental agreements, and legislation. One cannot fully appreciate how these systems operate without studying the legal instruments through which intergovernmental transfers are provided as well as their interpretation and enforcement by the courts. Each legal framework involves crucial design choices that determine which level of government makes the rules governing intergovernmental transfers, who may modify those rules and under what conditions, and who resolves intergovernmental conflicts when they arise. Every design choice reflects policy preferences in favor of centralization versus decentralization, political decision making versus adjudication, fiscal autonomy versus fiscal restraint, and acceptance of economic disparity versus insistence on fiscal solidarity. Policy preferences are thus embedded in the legal structure of every intergovernmental transfer system. This chapter examines the legal architecture of intergovernmental transfers through a series of case studies—Belgium Canada, Germany, India and South Africa—and draws some tentative conclusions from the case studies about the impact of legal design on the legitimacy, effectiveness, and stability of systems of intergovernmental transfers.